BIRMINGHAM, Ala.—When the NCUA board last week approved a final rule to raise the definition for small credit unions to $100 million, one member of the board and others within the movement questioned whether the limit should not be higher, as CUToday.info reported here.
Now, former NCUA Chairman Dennis Dollar, while supporting the agency’s decision, said he believes NCUA’s definition of a small FI should some day be on par with banks’.
“The definition of a small credit union, like that of a small bank, continues to go up each year with necessary growth, increased numbers of mergers and economy of scale driven marketplace changes,” said the Dollar Associates principal. “That is very unlikely to change, and I think NCUA is right to try to keep their definitions up to date with the changing environment.”
But Dollar said he fails to see why a $300-million bank is a small institution but a $300-million credit union is not.
“They both operate in exactly the same marketplace and, frankly, with virtually the same set of regulatory expectations,” Dollar said. “Ultimately, I think NCUA should look at their threshold for a small institution with an eye toward parity with the banking industry definitions.”
NCUA Chairman Debbie Matz stated at Thursday’s board meeting that in today’s credit union system data shows that $100 million serves as a “logical proxy” for complex credit unions, and also $100 million meets the modern definition of small credit union.
Matz said that before deciding on the $100-million threshold, the agency considered each alternative suggested in comment letters, noting some comments asked for thresholds as high as $250-$550 million.
Matz said the board found those high thresholds would be difficult to justify with economic impact data, saying that key metrics indicate that these larger credit unions are performing much better than credit unions under $100 million.
Board member Mark McWatters last week called the vote to increase the definition a “step in the right direction,” but also said, “I think it’s a lost opportunity not to expand the number above $100 million to $250 million or even $500 million. What am I saying this? Am I being ornery or picking an argument? No, not at all. If you have a $250-million credit union and a $250-million bank, they are competing in the same space. So small is small; let’s treat them the same way.”